6 companies that should report huge earnings gains

Analysis: A weather-related slump in the first quarter is giving way to a profit rebound

After the worst U.S. winter in decades, scores of companies will show plenty of quarter-over-quarter sales and earnings improvements starting this week.

But looking beyond the weather will be of more interest, because many companies that suffered the worst earnings declines in the first quarter are also expected to show huge year-over-year earnings growth for the second quarter.

To highlight those, we began with the S&P 1500 Composite Index, which includes the components of the S&P 500SPX, -0.43%
the S&P MidCap 400MID, -0.31%
and the S&P SmallCap 600SML, -0.45%
In order to show which companies posted the worst earnings decreases during the first quarter, we limited the list to stocks with positive earnings per share for both periods.

So here are the 10 profitable S&P 1500 companies showing the worst year-over-year EPS declines for the first quarter:

Investors might have expected to see a list of retailers, because shoppers stayed at home during the frigid temperatures. But the list is varied, in part, because we focused on EPS. Many of these companies reported lousy results that had nothing to do with the weather.

Here’s where it gets interesting: Seven of those stocks are expected to show year-over-year EPS growth for the second quarter, based on consensus estimates among analysts polled by FactSet. Six may report double-digit increases in EPS:

Here’s more on all 10 companies, beginning with the ones showing the largest year-over-year EPS declines for the most recently reported quarter:

Prologis

Prologis Inc.
PLD, -0.82%
of San Francisco is a real estate investment trust that acquires, develops and leases industrial distribution and retail properties worldwide. The stock has returned 13% this year through Monday’s close at $41.12. The shares have a dividend yield of 3.21%.

The company saw a 98% decline in reported earnings per share for the first quarter, to 1 cent. However, core funds from operations (FFO) increased to 43 cents from 40 cents a year earlier, and more than covered the dividend.

Equity REITs — that is, those that invest in commercial properties — report FFO because it excludes gains and losses from property sales and depreciation, and provides a better measurement of how well earnings cover dividends.

Analysts polled by FactSet expect Prologis to report a second-quarter profit of 9 cents a share, improving from a net loss of 3 cents in the second quarter of 2013. The consensus FFO estimate for the second quarter is 46 cents, compared with 41 cents a year earlier.

Greenhill

Greenhill & Co.
GHL, -0.10%
is an investment bank headquartered in New York. The stock is down 17% this year through Monday’s close at $47.01. The shares have a yield of 3.83%.

First-quarter EPS was down 98% to 1 cent, as Greenhill reported a 45% drop in revenue to $43.6 million. The company lost $4.9 million on its “remaining significant” principal investment.

Greenhill chairman Robert F. Greenhill on April 23, in a statement, said: “In the year to date, we have seen a substantial increase in client activity, such that we expect a strong rebound in revenue and the achievement for the full year of metrics relating to revenue productivity, profitability and return of capital to shareholders consistent with our historic performance.”

For the second quarter, analysts expect EPS to come in at 46 cents, down from 52 cents during the second quarter of 2013.

Impax Laboratories

Next is Impax Laboratories Inc.
IPXL, +0.06%
of Hayward, Calif., which makes and distributes generic prescription drugs, and also branded proprietary medications for treating central nervous system disorders. The stock has returned 16% this year through Monday’s close at $29.28.

First-quarter EPS fell 94% to 9 cents. However, if one-time tax prepayments of $150 million were excluded, adjusted EPS declined to 24 cents from 37 cents a year earlier.

Revenue fell 20% to $118.7 million, mainly because the first-quarter results reflected the loss of patent exclusivity for the company’s Zomig tablet and disintegrating tablet products in May 2013.

Analysts expect the company to report second-quarter EPS of 37 cents, up from 8 cents a year earlier.

Boise Cascade

Boise Cascade Co.
BCC, -0.21%
of Boise, Idaho, makes and distributes wood construction materials in the United States and Canada. The stock is down 7% this year through Monday’s close at $27.31.

The company’s first-quarter EPS tumbled 93% to 14 cents, mainly because the year-earlier period included a $68.7 million tax benefit springing from the company’s earlier conversion from a limited liability corporation in February 2013. Sales were up 3% from a year earlier to $767.2 million.

Analysts expect Boise Cascade to report second-quarter EPS of 36 cents, up 52% from a year earlier.

“While the timing of orders created a slow start to 2014, we expect strong growth in the second quarter to result in first-half growth in both sales and EBITDA compared to the first half of last year,” Cambrex CEO Steven Klosk said in a statement May 2. He also expressed confidence the company would show operating earnings growth for 2014, “similar to the increases we have delivered over the last three years.”

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